President-elect Joe Biden is facing mounting pressure to extend student loan debt relief or forgive thousands of indebted dollars for the millions of people who had their loan payments suspended throughout the pandemic.
With payments expected to resume in the new year, action on this front could help many who are out of work or facing financial hardship. Such relief could have a significant impact beyond the pandemic for Black student loan borrowers who are regularly forced to take on higher debt loads to afford college.
Student loan debt hit a record $1.6 trillion among 45 million borrowers in February, and has only increased during the pandemic. Biden’s Plan for Education Beyond High School during his presidential campaign to forgive some student debt has recently gained notoriety as many have called for a complete forgiveness of all such debt.
More than 86 percent of Black students take out federal loans to attend four-year institutions compared to about 60 percent of white students, according to data from the National Center for Education Statistics. Student loan cancellation could have a sizable impact on the Black community and shrink the racial wealth gap.
“Structural racism creates a world where Black families are denied the ability to build wealth,” said Dominique Baker, an education policy professor at Southern Methodist University.
Households headed by white adults 25 to 40 years old have 12 times as much wealth as their Black counterparts, according to The Roosevelt Institute, a progressive think tank that focuses on economic equality. Eliminating student debt would narrow this gap to five times.
Black adults have an average of over 85 percent more debt than their white peers when starting their careers due largely to student loans, a disparity that grows by 6.7 percent annually, the authors of a study in Sage Journals concluded after controlling for family background and postsecondary paths.
This gap often results in Black students having fewer economic resources to finance their education, often turning to loans at a higher rate, Baker said.
A significant body of research shows that Black students rely on loans at a disproportionate rate than white students, they’re more likely to borrow, they borrow larger amounts and they struggle significantly more with repayment because they’re always one step behind white counterparts who tend to have more access to various forms of wealth, Baker said.
Baker noted the irony in telling young people that the path toward economic prosperity comes with higher education, even though student debt can be a life-long burden.
Jae Crawford, a junior at Brown University, was raised by a single mother of three who works as a public school teacher in Florida. She said her mother still owes about $50,000 in student loan debt and another $30,000 in medical bills.
“I’ve spent many nights worrying about finances and paying for college,” Crawford said
Biden’s detailed plan maps out the future of student loans and tuition-free colleges and universities. But he has not disclosed whether those plans would be established by Congress, by executive order or by government agencies such as the Department of Education.
Crawford said she is hinging her future on “student debt forgiveness from the incoming administration.” She currently owes $12,000 and is “pretty unsure” of how she’s going to repay it. Crawford may attend law school, where she’ll “take on significantly more debt.”
Biden’s plan does include some cancellation, but there are also some caveats that determine eligibility: Some will be eligible for $10,000 of relief in exchange for each year of national or community service up to five years. Those who earn less than $25,000 annually would not be responsible for repaying their undergraduate federal loans and would not incur any interest.
People earning more than $25,000 would have to make their monthly payment for 20 years to be considered for forgiveness.
For Crawford, total debt forgiveness “would mean the world to me. My mom is still paying off her student loans.” Crawford said she is concerned she’ll end up in a similar position.
Sara Wilson, a senior at Bethune-Cookman University and a multimedia journalist at WDHN News in Alabama, said, “It would be a huge weight off my shoulders if the debt just got cleared.” Wilson graduates this semester and loans are “the only thing I think about. I’m extremely worried about it.”
“I don’t even make $20,000 in a salary, and that’s how much I owe in student loans,” Wilson said. “You’re in debt forever because the interest is so high, and it keeps increasing your loans. It’s like a trap. It’s an economic jail.”
The default rate among Black college students is at “crisis levels,” the Brookings Institution reported in 2018, due largely to the racial wealth gap and a lack of economic resources. Some Democratic lawmakers are urging Biden to forgive everyone’s loans once he takes office to help boost the economy.
Sens. Chuck Schumer of New York and Elizabeth Warren of Massachusetts, both Democrats, have proposed erasing the first $50,000 of debt for each borrower through executive order, Schumer said in an interview this month with the writer Anand Giridharadas.
Rep. Adam Schiff, D-Calif., encouraged Biden to “cancel student debt on day 1. He doesn't need to wait for Congress. And millions of Americans saddled with debt can't wait, either. It's good policy, too — and will stimulate the economy quickly. We need to think big to build a better, fairer economy for all.”
Biden has not commented on this possibility and continues to stress his plan. If he does not issue an executive order, sending legislation through Congress would be an option.
Sen. Lamar Alexander, R.-Tenn., introduced a bill in July that similarly proposed Biden’s 20-year undergraduate loan cancellation timeline and tacked on an additional five years for graduate loans. Alexander added that monthly payments “will never be more than 10 percent of your income,” after deducting “necessities of life such as housing and food.”
Numerous other student loan-related bills have been introduced by other legislators.